Recast steelmaker

Retooling: Bethlehem Steel Corp. is undergoing a $615 million renovation of its Sparrows Point plant, giving life to a facility that not long ago had a doubtful future

July 04, 1999|By William Patalon III | William Patalon III,SUN STAFF

IN THE SEPULCHRAL blackness of Bethlehem Steel Corp.'s Sparrows Point blast furnace, 1,000 grime-covered workers toil in tight quarters, elbowing their way past each other on narrow catwalks encircling the armor-plated furnace or chipping away like coal miners at the brick lining that contains its 2,800-degree hellfire.

Those thousand workers on the L blast-furnace project are among 8,500 at the Sparrows Point steelmaking facility this month -- a number well above normal, thanks to the 4,000 contract workers whose numbers nearly equal those on Bethlehem's payroll.

Nearly all the outside workers and many Sparrows Point employees are racing to complete seven modernization projects costing $615 million -- an investment that underscores Bethlehem's confidence in Sparrows Point's future. An investment of that scale virtually guarantees that a facility long viewed as a cash drain and a candidate for closure will remain part of Baltimore's economy for more than a decade -- and probably longer, analysts and industry experts say.

The outlays come only because of compromises between the company and the United Steelworkers of America union that allow for job reductions and more flexible work rules, which make Sparrows Point more competitive. A deal between the company and the USW, for instance, paved the way for a cold-rolling mill, which in turn made the relining of the blast furnace a necessity. Without that deal, the cold mill might have been built elsewhere.

Sparrows Point is "no longer a spare part," said Waldo T. Best, a steel industry analyst with Morgan Stanley Dean Witter in New York City. "The watershed event was that the union agreed to trade some jobs -- through attrition -- for the investment of capital. With that comes long-term job security. If you get the company to put money into the plant, instead of job security for 10 years, you may essentially guarantee jobs for 100 years."

Most of the $615 million will come from Bethlehem's corporate coffers. But it is also cutting costs by allowing outside companies to invest in, build and operate facilities that will let Bethlehem contract out ancillary operations.

The key investments and the projects they finance consist of: $300 million for a new mill to produce cold-rolled steel, a high-profit product.

$100 million to replace the bricks that line the L blast furnace, which produces molten iron.

$70 million to update the basic oxygen furnace, which turns the molten iron made by the blast furnace into steel.

$60 million to widen one of Sparrows Point's two casters, which create the steel slabs that are sent to the hot-rolling mill where the metal is rolled and stretched to make it thinner.

$60 million by a Michigan company, DTE Energy Services, to build a pulverized coal injection plant that will feed the L blast furnace. Bethlehem will lease the land to DTE and buy the pulverized coal from that company.

$15 million by an outside contractor to build, own and operate an on-site commercial scrap yard from which Bethlehem can buy scrap to use in its own steelmaking operations.

$10 million by Bethlehem and a joint-venture partner to build a commercial roll-grinding plant to create ultra-high-quality surfaces on steel made at Sparrows Point.

At the same time, Sparrows Point Division has another hundred or so smaller projects under way, most of them repair jobs made possible by the shutting down of different operations while the furnace is being rebuilt.

"This is the busiest year we've had in decades," said Carl Johnson, president of Bethlehem Steel's Sparrows Point Division.

All this -- investing in the most modern technology, focusing on the main business and cutting costs wherever pos- sible -- is aligned with Sparrows Point's goal of putting itself in position to offer the best service of any steel company and prices that are competitive.

Not coincidentally, the biggest projects are intertwined. For instance, by building the new cold-rolling mill, Bethlehem was committing to keeping the plant here open for a decade or more, meaning the blast furnace had to be refurbished. And with the blast furnace refurbished, the steelmaking basic oxygen furnace needed modernizing.

With the acquisition of steel platemaker Lukens Inc., Sparrows Point had to be able to provide wider steel slabs, necessitating the changes in the caster system, Johnson said.

At $300 million, the new cold-rolling steel mill has the biggest sticker price. But the most important project at the moment is the blast furnace, which last had its entire lining replaced in 1990 (some repairs were made in 1993).

Heart of plant

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